Kudler_Foods

Kathy Kudler owner of Kudler Fine Foods established her first grocery store in the city of LaJolla in 1998. After the wide success experience a decision to open another location brought forth the next location in the city of Del Mar and finally a store in Encinitas culminated the foresight of providing gourmet food options. Kathy over the years laboriously serves as the head manager for the three locations. As a result of this, enhance added to the normal functionalities of the annual audit to build a process required for the audit to team to comply. Because of the volume and capacity of each location, arrangements to provide a proposed audit schedule. An analysis of possible audit features to advise the client through the procedure to review in the audit proposal the purpose of this audit schedule. I. Distinguish between the types of IT audits and which types(s) might be used for each process (Payroll, A/P, A/R, and Inventory) The IT audit includes “attestation, findings and recommendations, SAS 70 Audit, and SAS 94 Audit” (Hunton, 2004 ). An auditors’ attestation engagement enforces an assurance to keep the company responsible for maintaining the internal control. Accounts receivable and payable managed by the organization to ensure business procedures remain in place of maintaining the reasonableness of the financial statement. This can be achieved by reviewing ratio analysis and recalculating the data. Outsourcing to a third party, such as Ceridian specializing in payroll services can aid in benefiting the level of clarity exchange. It becomes difficult during the duration of an audit to calculate the number of hours, rate, and deductions based on each employee. During audit period, an auditor can request a service provider, such as Ceridian if it had undergone SAS (Statement on Auditing Standards) 70 Audit to populate a report. If an external audit firm retained to ensure the internal controls work effectively based on the service providers’ management report. Customers who decide to place online orders once submitted the inventory database automatically receives updates. As a result of the automated feature of the inventory system the requirement for an auditor must follow the regulations of the SAS 94. By conducting the audit in such a way an understanding of the flow of transactions, how to process it, and determining the potential risk factors associated with the system. The procedure leads to an effective application of electronic business operations. If an organization devices methods to improve the system to enhance findings and recommendations will be applicable to the implementation plan. A consulting service by the auditor regarding IT project based on its level of complexity necessitate an engagement letter. Part II – Recommend the IT audit most appropriate for each process As mentioned above, the processes similar to each other, so it would make sense that the audits performed possess similarities. However, subtle differences require a sophisticated touch. Accounts payable and accounts receivable should receive an Attestation Audit. The point of an attestation audit provides assurance for the process or system to audit. Under the attestation guidelines, Kathy ought to organize a representation letter for the auditors to use, to presemt adequately positive or negative assurance of the processes within the Accounts payable and Accounts receivable systems. After building a system to house the A/R and A/P the next department to assess would be payroll. The current in-house operation a SAS 94 audit recommendation. The payroll process functions primarily as an electronic application. The audit requires user input, the records kept in a computer can be easy accessible (according to KFF). The decision not to outsource to a third party accounting firm, it diminishes the ability to qualify for a SAS 70 audit. All six steps reviewed with regard to the payroll department (Hunton, 2004). The next department to assess would be the store’s inventory. Due to the primarily computerized records of inventory, this would also qualify for an SAS 94 audit. The framework of a SAS 94 audit for inventory establishes guidelines to follow for a thorough completion: The guidelines to follow: physical and environmental review, systems administration review, application software review, and data integrity review. Part III—Example how the audit will be conducted The audits conducted for payroll, accounts payable, accounts receivable, and inventory maintain similar functionalities. The purpose of auditing serves to identify control weaknesses within the influence of the organization. The four previously stated areas to audit have parallel AIS functionality and controls; therefore, the assessment of each area should be cohesive in scope. The auditors start by planning the audit and understanding what must be “asked” through the duration of the audit. Next the audit team needs to do a Risk Assessment of the client’s business environment to ascertain how the client operates. The audit team prepares the audit program to develop the capacity of the audit. The various forms of auditing tools at the disposal of the auditors advance the level of accuracy. The next step, and probably the most crucial for an audit would be gathering evidence. Finally the auditors focus on extending the controls within the operating system, application software, and network security. The focus on the implementation processes highlights vulnerabilities of conducting an audit, especially if a manual process requires user input. CAAT’s or Generalized Auditing Software used to review the client’s files and check the change logs. Also it must verify the validity of the information entered into the input fields. Moreover, steps to verify passwords and to recognize other areas probable weaknesses in the control issues could occur. After the extrapolation of information has concluded the team decides a conclusive determination about the evidence gathered to deliver through an audit opinion letter prepared for the client’s management. Part IV—Identify events that might prevent reliance on auditing through the computer. After reviewing some of the data provided on the intranet it could be assessed the lack of cohesive data from one source to another. For instance, the data fields found in the inventory database under the inventory column do not match with those found in the general ledger. In other words, the inventory fields for the cheese and dairy and bakery department have different inventory numbers in the general ledger column whereas those in the meat and seafood, produce, and wine match. Therefore, the exploration of the data in those instances entered manually to compensate for the possible errors. Another area where a mistake with the computerized auditing system could occur can be found under the payroll section. If an assessment conducted to determine the number of employee’s applications located in the personnel file versus the number of people employed, it would not take long to identify a probable discrepancy. Once again in an attempt to reconcile this error extra steps to incorporate into the audit process. First a letter must be sent to each location participating in the audit to request copies of all employee personnel files. After determining the number of applications not on file, another memo or letter drafted requiring total compliance with the process. Finally, when the applications have been received a manual process must be undertaken to build a comparable database for the payroll section of the audit. In conclusion, Kathy Kudler has built an empire in the gourmet food sector but success only warranted when modifications continue implementation. The proposal provided above gives guidelines about how a computerized audit can be conducted at each facility. If any questions occur while reviewing these said documents, draft a detailed letter indicating the areas of improvement or need for interpretation. The only way to ensure each area of concern receives necessary attention a total commitment accepted by every person involved. References Apollo Group. (2012). Kudler Fine Foods. Retrieved from The Virtual Organization Portal website, https://ecampus.phoenix.edu/secure/aapd/cist/vop/index.html Bagranoff, N.A., Simkin, M.G., Strand Norman, C., (2008), Core Concepts of Accounting Information Systems. Retrieved from the University of Phoenix eBook Collection Database Hunton, J.E., Bryant, S.M., Bagranoff, N.A., (2004), Core Concepts of Information Technology Auditing. Retrieved from the University of Phoenix eBook Collection Database